Two Weeks in Two Minutes

At first I thought the task was easy. Readable in 2 minutes means it should be short. Deadline in 2 weeks means I have ample time to do it. Or so I thought.

First thing I did was went back to one of their mentor’s blog where I remembered reading an entry talking about trading system. So I read, and I took down notes and key points to help me outline my case study. I also googled what a trading system is and stumbled upon a good trading site where it outlined and explained what it is. Where I found out that a trading system is just a part of your trading plan. Where before, I perceived both as one and the same.

I drafted my outline not for my trading system but, now, for my trading plan. The task went
broader. By this time I intended to establish my trading plan to include the original task - my trading system. For I have to have a plan first for me to establish everything.

After I drafted my outline for my trading plan and system. I tried to seek advise from some of the group’s mentors just so to know that I am in the right track. Some replied right away and some took a while. Some replied frequently, long and detailed and some with just one word of confirmation. But all of them confirmed that I was doing the right approach. So I carried on.

After doing more reading, scanning and surfing the blogs and pages of the group, I found an
important advise from one of their mentors.

Q: How will you follow your rules strictly without violation? How to make trading rules that easy to follow? Or should I copy other trading rules? Thank you po.

A: You have to b clear on the kind of trader that you want to be. Some rules for trend following are different from momentum traders and problems happen if you mix the rules together. Once you have an identity as a trader, you create the rules and recite them before you plan and start your trade execution.

If you want the easy way, find a successful trader that aligns to your personality and style and then ask for his or her trading rules. from there apply the set and see if it fits you. If in the long term a rule doesn't work, tweak it, replace, or totally remove it. Always challenge individual rules in a set.

Then it hit me why he gave me two weeks to complete the task. For me to prove that the system works, I have to test it and get at least 25-33% hit rate for it to be considered as repeatable and profitable. But then I thought the two weeks were short to test and trade a trend following setup. But when I tried to tell him the time constraint, he just gave me a link to a site - a back testing site.

Yes. Back test. That was the answer. I felt dumb for confidently telling him about the time
constraint. I felt that I showed him weakness for not thinking it through when there was a simple solution for it. Back testing.

I spent the following nights back testing the system that I drafted. After all the day’s work and duties, I spent my nights staring at charts. The first few charts are time consuming as you have to carefully look for your entry parameters to be present for the chart to be qualified on your back testing parameters. For my system, I have to check for AOTS which was fairly easy to spot. Next step was to spot a breakout of major resistance (3 months minimum). Then look for the entry. The exit was the easier part as I just have to wait for the MA20 to break or my cut loss to reach a maximum of 4% for me to exit the trade.

As I was advancing through charts after charts, it felt easier and easier to spot my entries. I can identify major resistances by just looking at a zoomed out view of the charts. The initial target of 100 charts became 110 charts as some stocks that I randomly selected only had 1 valid setup during the case study’s timeframe.

I recorded the results into an excel file. After all the formulas and computing, I had an overall hit rate of 73%. Which I thought was too high as some of the mentors who replied to me to give their insights told me that 25-33% is the acceptable hit rate. So I thought that 73% was too much. Have I done something wrong during the backtesting? I tried to be as honest as possible so there’s no bias of the outcome.

I was back reading the trend followers discussion of their online modules group on discord when someone mentioned a similar case study. It was a study on AOTS and PUA. And it had an almost the same hit rate results as mine. That gave a confirmation that my results are just fine. I also took advise from one of their mentor who was tirelessly entertaining my queries. Though he said that my hit rate was too high, he dis mentioned that my timeframe when the study was made were mostly on bull market. So there’s my other confirmation.
The real problem came up when I was almost at the end of the study. I have my results. I have my charts. I have my outline. I have my write ups. But all these should be presented into an output that is readable in two minutes. There was the other challenge. All these figures, word and not to mention the 110 charts, and put them into a single file that you can read in two minutes

Two minutes.

Charts.

Words.

Figures.

What’s an output that have all these in one glance?

I was watching one of their member’s recorded live Facebook videos when I got the idea and solution for the 2 minute challenge. In the video, the member was explaining about how people solved and not solved his cypher for his one on one mentorship. And one person explained what was his process of solving the cypher. And he used an infographic to explain the process.

An infographic is used to explain things visually without the clutter of showing and explaining all the details.

And there’s my solution.

After this holy revelation. I instantly pinterested some ideas and sketched a draft. I finalized the final output within the last few days before the deadline as we will be busy packing for our flight in a week. I made two infographics - one for the process of designing my system and another one for all the results of the backtesting. I also compiled all the data into one document to serve as the full-on case study. Thank God, he let me finish my task first before my body got sick and caught colds.

Doing the task with a day job and husband/daddy duties was already challenging. Add to that the challenge of squeezing two weeks worth of work into an output that can be read and absorbed in two minutes. Nevertheless doing the task was worth it. Exchanging time for knowledge was never really a waste. I learned new things about something that I already knew and loads o things I don’t know before. Reading facts from books or blogs has a big difference in proving the facts by doing the actual study yourself. Again knowing things has a big difference with actually doing things.